Automatic drafts or debits, and direct deposits are electronic alternatives to the traditional, consumer and business banking processes of writing checks and making deposits using paper forms. These automated alternatives are well understood and have existed for many years. In the case of drafts or debits, an account-holder customer of a bank or similar financial institution contacts the biller to arrange the debits or drafts. In the case of debits to a bank account, the account holder provides the biller with routing and transit information for his or her bank account, or a copy of a voided check. The biller is typically a third party (that is, not the account holder or the bank) to whom the account holder makes regular payments, such as for an electric bill, a magazine subscription, a mortgage payment, etc. Once the biller has received the account-holder's authorization to deduct payments from the account-holder's account including the bank account information, the biller automatically debits the account-holder's account as bills become due. These debits are often made through the Automated Clearing House (ACH) Network. The ACH Network is a highly reliable and efficient nationwide, batch-oriented electronic funds transfer system for interbank clearing of electronic payments. The ACH Network is operated by a conglomeration of entities, including the U.S. Federal Reserve. It is well known and will not be discussed in additional detail. Many third-party billers will also arrange automatic debits to a card product such as credit or debit card account, in which case, one of the many card networks is used to process the payment.
Direct deposits are typically made to a bank account, or banking type of account at a financial institution, however, credits applied to a credit account are analogous to direct deposits. In most cases, account holders will arrange a direct deposit for salary received from an employer, although other types of payments, such as insurance payments, or government payments can also be received by direct deposit. In any case, to arrange a direct deposit, the account holder contacts the third-party direct depositor and provides the appropriate account information, just as in the case of automatic drafts. The direct depositor then automatically and electronically transfers the appropriate amount of money into the account-holder's account when payment is due. Direct deposits, like automatic drafts, often make use of the ACH Network.
Historically, banking customers have arranged both automatic drafts and direct deposits through the use of paper forms. Recently, some business entities have provided electronic means to arrange these transactions, typically via a secure Web site, or some secure personal computer software application. However, even when automatic drafts and/or direct deposits are arranged using electronic means, the arranging of at least some of these transactions involves the account holder contacting each responsible third party directly in some way. Thus, at least some changes to these transactions, for example, a change as to which specific bank or other account a transaction is to be applied, involves the account holder again contacting the responsible third-party biller or direct depositor to arrange the change. A consumer or business that makes extensive use of automatic drafts and direct deposits by multiple third parties can find the task of making such a change daunting, since it requires multiple billers and/or direct depositors to be notified. Thus, the size of this task effectively deters some consumers and businesses from moving an account to a new financial institution, or even changing which account is used for such transactions within a financial institution.